Last week we reported[1] how Florida’s west coast cities are facing a tempting proposition: Dumping Duke Energy and creating city-run power companies instead.
The numbers alone should give pause. One analysis estimates Clearwater would need to pay more than $1.1 billion to seize Duke’s assets and establish a municipal utility. [2]
Next week, the Clearwater City Council’s agenda[3] includes a presentation and discussion of the study it commissioned for more than $500,000. The study, produced by NewGen Strategies, estimates the cost of seizing Duke Energy’s assets and creating a government-run power company. But while the report presents its findings as a clear path forward, a closer look reveals something else — enormous risks, sky-high costs, and layers of uncertainty.
A big, uncertain price tag
The study claims to provide a single “all-in” price tag for seizing Duke’s grid in Clearwater. But buried in the details, NewGen admits the real cost of Duke’s assets could be 50% lower or 100% higher than its estimate. That means the true cost could range from $386 million to a high of nearly $1 billion. Think about that: nearly a half-billion-dollar price range. No business — or household, for that matter — would bet on numbers that uncertain. And no wonder the report itself bluntly states that there can be “no guarantee that the Clearwater MEU [Municipal Electric Utility] will achieve cost savings compared to continued service from Duke.”
The NewGen report assumes an “overnight” transition to a government-owned power company. That defies both history and common sense. In reality, these kinds of takeovers take years, sometimes decades. Just ask Boulder, Colorado, a city that spent more than $29 million of taxpayer money over 10 years just to ultimately renew its agreement[4] with the existing electric utility. Costs inevitably climb over, meaning Clearwater’s taxpayers would almost certainly be on the hook for more than even the study’s inflated upper-end estimate.
Consultants with an Agenda
It’s worth noting who conducted this study. One of the project leads, John Coyle, is listed as a “resource” with the American Public Power Association, a group that openly promotes municipalization. On a podcast about how to successfully take over utilities, he said “the secret sauce for a successful municipalization involves basically four things, the spread, the bread, the head and the lead, and what those elements really mean is the spread is, do you have a viable economic alternative to present to your community?” In other words, come up with a feasibility study that shows how a purchase price nearing $1 billion could somehow actually save customers money. Members of this NewGen team also provided reports to Boulder back in the 2010s, as part of the $29 million the city spent before abandoning the effort.
The Bottom Line
Clearwater’s leaders are now weighing whether to move forward with what could become a billion-dollar gamble. The study they paid for makes it clear: Costs are wildly uncertain, the timeline is unrealistic, and there is no guarantee of customer savings.
Before the city commits taxpayers to decades of debt and risk, the City Council should look past the glossy presentation and focus on what the study itself admits: There are no assurances this plan would work out better than sticking with Duke. In fact, there are plenty of reasons to believe it could be far worse.
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